Readings

Required readings:

• There Are Three Types of Inflation; We Have Two (NYT, 1974);

• The Great Inflation: 1965—1982 (U.S. Federal Reserve History);

• Policy choices did not cause recent years’ inflation—but did deliver strong wage growth (Economic Policy Institute).

Words of the day

• Demand-pull;
• Cost-push;
• Phillips;
• Class conflict.

Types of inflation

Types of inflation

Main agreed upon causes of inflation:

Types of inflation

[1] Demand-pull inflation:

Types of inflation

[1] Demand-pull inflation:

Recall aggregate demand:

\[ C+I+G+(X - M) \]

Types of inflation

[1] Demand-pull inflation:

🔗 American Rescue Plan (2021)

Types of inflation

[1] Demand-pull inflation:

🔗 Inflation vs. unemployment over time

Types of inflation

[1] Demand-pull inflation:

In 1958, A. W. Phillips (1914—1975) empirically found that low rates of unemployment were associated with high rates of inflation, and high unemployment with low inflation.

Types of inflation

This relationship has since been referred to as the Phillips curve.

Types of inflation

Q: How can lower unemployment lead to a general increase in the price level (i.e., inflation)?

Types of inflation

[2] Cost-push inflation:

Types of inflation

[2] Cost-push inflation:

🔗 The lagged effects of COVID-19 supply chain disruptions on inflation (Brookings Institute)

Types of inflation

[2] Cost-push inflation:

Types of inflation

[2] Cost-push inflation:

🔗 Europe’s energy crisis is over (Reuters)

Types of inflation

[2] Cost-push inflation:

• Greedy corporations?

Types of inflation

[3] Conflict inflation:

Types of inflation

[3] Conflict inflation:

Types of inflation

[3] Conflict inflation:

Types of inflation

[3] Conflict inflation: